China must live up to the challenge of leadership in a new economic order

China's success at rallying both developed and developing nations to join the Asian Infrastructure Investment Bank gives it an opportunity for global economic leadership. This role hinges on its dual identity. On the one hand, China is the world's second-largest economy; on the other, it is a developing country which still receives aid from the likes of the World Bank. Hence, China is in a position to understand the priorities of the developing world, while being responsive to concerns of the developed world.

The US emerged as the underwriter of the global economic system with the Bretton Woods conference in 1944 and the Marshall Plan, when it led not only in terms of the size of its economy and military capabilities, but also in per capita gross domestic product. China, on the other hand, is taking up the mantle of leadership when a significant portion of its population still lives in poverty. Its growth is slowing to a "new normal", necessitating internal reforms for sustaining a modest 6-7 per cent growth.

The Asian Infrastructure Investment Bank is the first test for China's emergence as the new leader of a changing world economic order, setting the stage for the internationalisation of its currency and the emergence of Beijing as a major capital in global development finance. China is also undertaking initiatives like the Shanghai-based New Development Bank (BRICS bank) and the US$40 billion Silk Road Fund.

With the infrastructure bank, China has created a bridge to most of the traditional US allies that did not pay heed to US concerns about the new bank. The much vaunted "One Road, One Belt" connects China to Europe via a slew of routes. While the US and Japan ponder joining the infrastructure bank, major multilateral institutions, including the World Bank and Asian Development Bank, have expressed their willingness to work with the newcomer.

The developed world is beset with concerns over governance issues that China needs to allay with a robust framework of accountability. China's campaign against corruption at home needs to be matched by the right institutional safeguards against corruption at the infrastructure bank. The emerging economies of Asia need the bank's resources to meet the infrastructure gap of US$700 billion.

The infrastructure bank empowers China to bolster South-South linkages, and trade and investment relations with Central Asia, South and Southeast Asia, Africa and Europe. The developing countries, often disgruntled by the strings attached to the aid packages of the World Bank and International Monetary Fund, would have a bigger say in the infrastructure bank.